Acrow Formwork and Scaffolding Pty Ltd v Major Scaffolding Pty Ltd
[2019] VCC 2111
•18 December 2019
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE COMMERCIAL DIVISION | Revised Not Restricted Suitable for Publication |
GENERAL LIST
Case No. CI-17-02052
| ACROW FORMWORK AND SCAFFOLDING PTY LTD | Plaintiff |
| v | |
| MAJOR SCAFFOLDING PTY LTD | Defendant |
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JUDGE: | HIS HONOUR JUDGE MACNAMARA | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 10, 11 July, 28, 29, 30, 31 October, 1 November, 2 December 2019 | |
DATE OF JUDGMENT: | 18 December 2019 | |
CASE MAY BE CITED AS: | Acrow Formwork and Scaffolding Pty Ltd v Major Scaffolding Pty Ltd | |
MEDIUM NEUTRAL CITATION: | [2019] VCC 2111 | |
REASONS FOR JUDGMENT
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Subject: BUILDING CONTRACT
Catchwords: Building sub-contract for supply of labour; whether governed by which of a number of alleged sets of terms; whether labour contractor practically repudiated contract where its workers subject to indefinite industrial bans; whether various day labour claims to be treated as variations
Legislation Cited: Supreme Court Act 1986, ss33 & 38;
Cases Cited:Masters v Cameron (1954) 91 CLR 353; Hoenig v Isaacs [1952] 2 All ER 176; H Dakin & Co Ltd v Lee [1916] 1 KB 566; Universal Cargo Carriers Corp v Citati ([1957] 2 QB 401); Sunbird Plaza Pty Ltd v Maloney (1988) 166 CLR 245; Ross T Smyth & Co Ltd v T D Bailey, Son & Co [1940] 3 All ER 60; Mersey Steel & Iron Co Ltd v Naylor, Benzon & Co (1884) 9 App at Cas 434; Shevill v Builders Licensing Board (1982) 149 CLR 62; Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd (2007) 233 CLR 115; Webb v Spectre Group Pty Ltd [2018] VSC 704;
Judgment: 1. Within 14 days the parties must bring in short minutes to give effect to these reasons.
2. Costs reserved.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr J. Silver | JHK Legal |
| For the Defendant | Mr S. Rowland | Aughtersons Lawyers |
HIS HONOUR:
Background
1 In early 2015, Hacer Group Pty Ltd (“Hacer”), a major company in the construction business providing design and construction services, was head contractor for a project at 5 Elgar Court, Doncaster, to construct a residential apartment building known as “Garden Hill Apartments”. A Mr Jarrad Swilks of Hacer, contacted Acrow Formwork and Scaffolding Pty Ltd (“Acrow”), the plaintiff in this proceeding, relative to the supply of scaffolding and labour services for this project. (Affidavit of Colin Fisher, Court Book (“CB”) 65) On 23 July 2015, Acrow entered into a Scaffolding Labour Services Agreement with the defendant, Major Scaffolding Pty Ltd (“Major”), expressed to be for a term of 24 months. (CB 66, CB 71-95) The agreement appeared to be in standard form, as published by Acrow. This agreement was in “master” form; that is, expressed to cover the supply of labour services for the period of 24 months from its date, without being specific to any particular project. The occasion for its execution appears to have been Acrow’s engagement to work on a project at 116‑122 Towerhill Road, Frankston. This was the first occasion on which Major undertook contract work for Acrow. (T54, L19-23)
2
Major is a relatively small operator which contracts for the supply of labour to erect scaffolding. Its sole shareholder and director is Mr Ian R Walker, who founded the company in 1978. (T54, L4-15) Initially, Mr Walker’s point of contact with Acrow was Mr Bob Edwards. (T55, L21-29). Mr Walker said that he provided a price for the supply of labour for the Elgar Court project on the basis of a plan of the scaffolding layout provided to him, presumably by Mr Edwards. (CB 671-3, T56, L5-21) Mr Walker provided a quotation for this work dated 27 August 2015 and styled “Revised quotation”. (CB 556, T56, L22-23) Major quoted $231,900 “for the labour required to erect and to dismantle the above detailed scaffolding”. Mr Walker said that following
further reflection, Mr Edwards of Acrow realised that the building design would not be able to use standard scaffolding ties, but two fixed bolts would be required in light of the design for the building calling for sunshades and screens, and a “hop‑up bracket” would be required. (T57, L15-31) This, it would seem, required quoting an extra charge of $11,415. (T58, L8-9) These figures were exclusive of goods and services tax (GST). (Ibid, L12)
3 According to Mr Walker, he attended a meeting in November or December 2015 relative to the Elgar Court project with a number of Hacer representatives, Jeff Stewart, Jonathon Fox and a Mr Simmons. (T58, L29-T59, L18) According to Mr Walker, Acrow, which was providing the scaffold, was head sub-contractor to Hacer, with his company, Major, being a sub sub-contractor supplying labour to Acrow. The labour supply by Major was being quoted to Hacer with a $30,000 mark-up when supplied by Acrow. According to Mr Walker, Mr Stewart “split” the quotation so as to dispense with this $30,000 mark-up, and the contract was awarded to Acrow, or, as will appear as Mr Walker saw it, to Acrow as to the scaffolding and to Major as to the labour. (T59, L26-T60, L7) According to Mr Walker, Major “would be doing the labour component directly to Hacer”. (T60, L14-15) This does not seem to have been the interpretation of events adopted by Acrow and Hacer.
4 Mr Walker signed a document on Hacer letterhead styled “General Scope Conditions” on 11 November 2015. (CB 565-6) He described it as “the Hacer’s (sic) scope”. (T61, L17) Major was asked to execute another Scaffolding Labour Services Agreement on Acrow’s standard form to be dated 26 February 2016. In fact, this document was not executed on behalf of Major. (CB 238-262) According to Mr Walker, when asked to sign by a Mr Pech of Acrow, he told him, “We wouldn’t be signing it, because we’re working with Hacer”. (T62, L22-23) In Schedule 1 in the table next to the words “Subcontract sum”, appears the following: “$300,736.00 excl GST, Variation Hourly Rates, Normal Time $98, Double Time $120”. (CB 263) Mr Walker said that on another occasion he had a discussion with Mr Pech about liquidated damages. He said that when one was dealing with scaffolding, there was “no permanent structure”, and therefore “nobody signs … liquidated damages when you’re only doing a hire situation”. (T64, L15-29) This discussion, according to Mr Walker, related to “the paperwork from Hacer”. (T65, L1-2)
5 By an email dated 3 December 2015, Contracts Administrator, Mr Lior Arad, at Hacer, sent an email to Messrs Stewart and Pech of Acrow stating, “I am pleased to inform you of your successful tender for the Gardenhill Apartments Project”. The email covered the form of subcontract. (CB 334) Mr Stewart, Acrow’s National Sales Manager and Marketing Manager (T305, L15-16), described the process whereby Acrow won the tender as follows:
“…we offered them two alternatives in our quotation originally. The original price we quoted was in the vicinity of 526,000. We then - in order to get to the price to win the job we negotiated our margin in effect on the labour, which was 30,000-odd, 34,000, off that price to get to 492.” (T309, L3-8)
6 To enable Acrow to absorb the $30,000 cut in its quotation or to mitigate its effect, there was provision for Hacer to deal with Major directly for the payment relevant to the provision of labour. (Ibid, L13-26; CB 382, cl 8(b)). According to Mr Stewart, the Acrow Subcontract Agreement with Major was put together from a standard form by Mr Pech. (T312, L4-12) It included a provision for liquidated damages at the rate of $3,000 per day “capped at $24,647.35”. (T263) According to Mr Stewart, “we wanted to actually bring [this provision] into this new contract”. (T312, L25-26) Mr Stewart, Mr Pech and Mr Walker had a discussion relative to this provision, according to Mr Stewart’s accountant. (T313, L1-6) According to Mr Stewart’s recollection, “I don't think Ian [Walker] was in favour of having the liquidated damages put into the contract”. (T313, L16-17)
7 Major began work on site at “the end of April 2016”. (T69, L26-7) Major rendered a tax invoice to “Hacer Group (Vic) Pty Ltd” dated 30 April 2016 in the sum of $74,800 inclusive of GST. (CB 569) This invoice referred to a contract sum of $300,736, which represented an adjustment or revision from the initial quotation, allowing for the “hop-up brackets” and the provision of additional ties. (T68-9) Major provided an extra quotation for the loading bay and stair shaft. (T70, L13-20; CB 567) The quotation for “stair shaft 2” was dated 21 April 2016 and addressed to Liam White of Acrow. Major also rendered a handwritten quotation for the cost of “shift hop ups”, “re locate ties”, “G/rail ledges, kickboard and [illegible] clip”. The quotation was $7,240 per floor. (CB 669) From 30 April onward, Major rendered a series of progress claims against its contract to supply labour and day labour charges. (CB 569-605) All of these invoices were addressed to Hacer.
8 Mr White gave Major what was described as a “Day Labour Book”, including dockets to record the number of hours worked. This book was intended to record charges which were claimed to be for labour over and above and outside the scope of the work for which Major had quoted and agreed a price on. (T73) The claims for additional labour charges were made on pages from the Acrow Day Labour Book, including its corporate logo. (CB 743-769) These claims were made by Major’s chief representative on site, Andy Woolsey. They were also “signed off” on behalf of Hacer. (T74) These various charges for labour have been paid. (T74-75) Invoices 8825 to 8793 were all paid. (T77, L16-21) The invoices 8821 onwards remain outstanding. (Ibid, L22-27, CB 592-605) The Day Labour Sheets were signed on behalf of Hacer, either by Mr Damien Milton, site manager, or Mr Troy Dutchen [sic, scil Gudgeon], foreman. (T79, L1-12)
9 Work proceeded until, in early August 2016, the site was visited by a union representative from the CFMEU, whose investigations disclosed that Major Scaffolding’s workers on site were receiving “cash payments”, that is, payments of their wages without the deduction of Pay As You Go (“PAYG”) income tax instalments. (T79, L18-23, T80, L28-29) The Union did not accept this as a proper and appropriate mode of payment. (T81, L4-6) Amounts for superannuation redundancy pay and so forth had been provided for. (Ibid, L3)
10 According to Mr Stewart of Acrow, he was informed of these events on or about 5 August by Mr Jonathon Fox of Hacer. (CB 535, [9-12]) Mr Woolsey, Major’s leading hand/supervisor on site was approached by shop steward Mr Dave Irwin, directing the Major workers to stop work. (T221, L1-7) At that time, there were approximately three to five Major workers on site, and for a period of three weeks they were required to sit in the shed, stood down from work. (Ibid, L8-14) They were precluded from doing any work, except for some minor matters which the shop steward was prepared to accept were being carried out for safety reasons. (Ibid, L20-27) Mr Walker said that he tried to resolve matters by negotiation with Union State President, Mr Ralph Edwards, but to no avail. (T84, L14-25) Eventually, according to Mr Woolsey, Mr Jonathon Fox of Hacer came into the shed and told Mr Woolsey and the others, advising them to leave the site because they were creating “tension” or “friction”. (T222, L20-24) Mr Woolsey said he was happy enough to leave because “after three weeks of sitting there I was going crazy” (Ibid, L30-31).
11 Mr Walker was summoned to a meeting with Messrs Fisher, Stewart and Pech late in August in an attempt to resolve the impasse. (T85, L26-31) Mr Walker complained that the meeting “wasn’t going anywhere” despite his hope that it might resolve something. (T86, L8) He described “a man … walking up and down the corridor waving a bit of paper saying, ‘Breach of contract.’” Mr Walker said he then left (Ibid, L22-26). Mr Pech attended the meeting. He said nothing, merely observing and taking notes. (T496, L8-15) Mr Pech recalled a proposal being made on behalf of Acrow: “there was a liability of tax that remained unpaid, and if Major were to take the risk of paying that short payment maybe there was room for them to proceed on site”. (T496, L27-30) Mr Pech said Major, presumably via Mr Walker, “would not meet that liability”. (T497, L6)
12 Mr Stewart recollects the situation as being that resolution of the “stand down” entailed either Acrow or Major’s accepting liability for the tax that remained undeducted “if in fact the workers on site were audited down the track”. (T317, L19-24) This apparently was the upshot of discussions between Mr Fisher of Acrow and CFMEU State President, Mr Ralph Edwards. (Ibid, L25-27) As Mr Stewart remembered events, Mr Walker, on behalf of Major, said “‘I can’t pay it’”. (T318, L10-12) The most senior Acrow representative present at the meeting was Mr Colin Fisher, who was, at that time, Acrow’s General Manager, with national responsibility and particular additional responsibility for the company’s operations in Victoria and South Australia. (T417, L12-17)
13 Mr Fisher said his objective at the meeting was to obtain a resolution. He said, “it was far simpler to remedy and get the guys back working again than it was to look at alternatives to get the job done. So the intention of that meeting was that”. (T419, L6-9) According to Mr Fisher, Mr Walker admitted to him that Major had made payments without PAYG deductions. (Ibid, L11-17) Mr Fisher said he put it to Mr Walker that Major should underwrite any tax liability. Acrow was unwilling to do so. (T421, L5-7) Mr Fisher recalled Mr Walker stating in response, “‘Do you realise how much that might be? There is no way that I could afford to do that and that would effectively send the company broke’.” (T421, L17-19) Mr Fisher agreed “it was very likely” that he had said “there was a breach of contract here and that we [Acrow] would have to get somebody else in to complete the works, as the contract says; unless there was a solution to it, I would have to get somebody else in to do the remaining works.” (T423, L20-24) According to Mr Fisher, Mr Walker’s only response was “a kind of shrug of the shoulders”. (Ibid, L27-28)
14 Mr Walker said that following the end of the meeting, “I had no contact with Acrow after that”.(T89, L3) According to an affidavit filed on his behalf, Mr Fisher said that on 23 August 2016, he telephoned Mr Walker of Major Scaffolding, advising, “We can’t continue with having you on site. We are terminating our Services Agreement with you”. (CB 29, [28])
15 Mr Fisher said that on 25 August 2016, he instructed Acrow’s solicitors “to send a formal termination notice to Major with a request for Major to show cause as to why the termination ought not to remain in effect”. (Ibid, [31]) Acrow’s solicitors, JHK Legal, sent a letter dated 25 August 2016, by facsimile transmission to Major Scaffolding, marked for the attention of Mr Ian Walker. It alleged a clear breach of clause 5.1(b) of the relevant Scaffolding Labour Services Agreement dated 23 July 2015, which it quoted in the following terms as being an obligation that Major must:
“(b)Make provisions for annual leave, personal leave, long service leave, superannuation, training guarantee levies, payroll tax and any payments required to be made for or on behalf of the Contractor or any of the Contractor Personnel by virtue of the Contractor performing its obligations pursuant to this Agreement (including where a Contractor Personnel has been injured).”
16 The letter alleged a breach of the Agreement “by paying cash to your employees and not complying with clause 5.1(b) of the Agreement”. The letter referred to “a verbal termination notice … provided by Mr Colin Fisher and Mr Jeff Stewart on 23 August 2016” and continued, “We are instructed to confirm that the Agreement was terminated on 23 August 2016”. The letter continued:
“Within 24 hours from the date of this correspondence, our client requires you to show cause as to why the Agreement should not remain terminated by Acrow and such cause should include all evidence, information and documentation which support your position.”
17 The letter said that “Acrow have appointed another contractor to complete the Agreement and Acrow reserves its rights pursuant to clause 11 of the Agreement to recover any loss, costs, expense or damage suffered by Acrow”. It said that Acrow would “suspend payments due or which may be due to Major”. (CB 283A-283B)
18 As at the time when the Major Scaffolding workers were told to vacate the site after a three-week “stand-down”, therefore around the end of August 2016, Mr Pech said that the scaffolding work had reached the following stage:
“There were some requirements for extra variations for various spots on the roof area. There was the requirement to correct the scaffolding on one of the faces of the building that was too close.” (T497, L24-27)
19 Responsibility to source labour to complete the work, most notably to dismantle and remove the scaffolding, lay with Acrow following Major’s termination. The person responsible at Acrow was Mr Pech. (Ibid, L31) Acrow had a group of four or five companies which it customarily called upon for labour of this sort. (T498, L4-8) This project was a large one involving 10 storeys and, as a result, there were only one or two operators who would be suitable. (Ibid, L17-22) In fact, Mr Pech approached four contractors. (T500, L23-27) Mr Greg Illarietti, an estimator for Reliable Scaffold Services, quoted $415,860 to provide labour to dismantle the scaffolding at the Elgar Court project in an email dated 25 September 2016. (CB 670) That quotation was not accepted. (T501, L4-5) The other quotations, according to Mr Pech, were “verbal”, viz oral – not in writing, by word of mouth only. An organisation known as Scaffold iT, “quoted around $140,000-$150,000”, which quotation was accepted. (T501, L8-18) A similar quotation from SMS Scaffolding was not accepted. (Ibid, L19-24) The final quotation was from Central Scaffolds which quoted around $300,000, which was also not accepted. (Ibid, L25-28) At the time of Major’s termination, it had yet to complete work costed at $90,000 in accordance with its quotation. Mr Pech said none of the alternative contractors gave any credence to that figure. (T502, L1-11) In the period October/November 2016, two contractors, namely Scaffold iT and Nomad Scaffolding, rendered a series of invoices, predominantly on forms published by Acrow. (CB 623-655) Further, Day Labour Sheets were rendered by an organisation known as Central Scaffolds. (CB 656-666) The work appears to have been completed during those months.
This proceeding
Plaintiff’s claim
20 By its Further Amended Statement of Claim dated 1 November 2019 (“the Statement of Claim”), Acrow alleged that it and Major entered into what is described as the “First Agreement” dated 23 July 2015, said to be “a generic Scaffolding Labour Services Agreement”. This agreement was said to contain “a template of generic terms that the parties intended to apply to any contractual relationship applying from 23 July 2015 for a two-year period”. It was said not to contain a schedule tying it to any particular project. Clause 5.1 of that agreement was said to “make provisions for annual leave, personal leave, long service leave, superannuation, training guarantee levies, payroll tax and any payments required to be made for or on behalf of Major”.
21 It was said, by virtue of clause 3.1, Major was obliged to “perform all services…and do all things necessary to complete the Work” in accordance with the First Agreement. It was further said Major was obliged to work in accordance with the Construction Program (clause 3.2(d)).
22 Specifically with respect to the project at 5 Elgar Court, Doncaster, it was said that Acrow agreed with Major as to a scope of works described as the “Hacer Scope”, and that in carrying out the works in the Hacer Scope, Major would do so on what was said to be “Agreed Conditions”, with Major executing a “formal agreement”, quoting “substantially the same form as the First Agreement” with the works being those in the Hacer Scope. It was said on 11 November 2015 Mr Walker signed and dated the Hacer Scope. Major would provide all labour associated with erection and dismantling the relevant scaffolding for $300,736, exclusive of GST, with Acrow and/or Hacer responsible for the cost of hiring the scaffolding, any cranes, and Alimak lifts. A crane and/or Alimak would be supplied at the time of erection of the scaffolding and no crane would be provided at the dismantling stage. Acrow “would agree with Hacer for Hacer to directly receive any payment claims from Major, for progress payments or approved variations, and Hacer would pay Major directly”.
23 For approved variations, Major could charge labour at the hourly rate of $98 per man per hour for normal time, and $120 per man per hour for overtime, with variations to be approved by Hacer and Acrow “carbon-copied for proof of such agreement”, with Major “entitled to make progress claims throughout the works”. These conditions were said to have been “discussed orally by Jeffrey Stewart and Uri Pech of Acrow, and Ian Walker of Major, between approximately October 2015 and February 2016”.
24 It was said that Acrow and Hacer executed a Subcontract Agreement referred to in the Statement of Claim as the “Head Contract” on 16 January 2016, which, in accordance with the Agreed Conditions, included provision for Acrow to pay Major directly for the installation of the scaffolding “up to a maximum amount of $300,736 (ex GST)”. As a result, there was effected a contract between Hacer and Major in accordance with the Agreed Conditions.
25 It was said that Acrow propounded a form of agreement to give effect to this in the same terms as the First Agreement, differing only in the schedule. Mr Walker of Major was alleged to have agreed to the terms of this written contract, save and except for the provision as to liquidated damages. In the circumstances, it was said the Second Agreement became binding upon the parties, including Major, despite its failure to execute it. Next, it was said that Major commenced performance of the terms of the Second Agreement on site at Doncaster and thereby undertook acts of part performance. Alternatively, it was said that in the events that had occurred, the First Agreement could be regarded as governing Major’s work at the Doncaster site. Major, it was said, rendered invoices and was paid $238,505.85 inclusive of GST. Save for one variation in July 2016, it was said that Major did not inform Acrow of any variations approved by Hacer.
26 It was said that, as at 23 August 2016, Major had completed erecting the scaffolding “but had not commenced, in part, or at all, to dismantle the scaffolding”. In early August it was alleged Major’s workers ceased work on site for an indefinite period having been stood down by the shop steward “because Major was paying its employees in cash”. As at 12 August 2016, Major was said to have conceded to Acrow that it breached clause 5.1(b) of the Second Agreement, in that “it had been paying its employees in-cash and had failed to provide for employee entitlements including, inter alia, payroll tax”. This concession or admission was said to have occurred at a meeting at Acrow’s premises in Clayton on 12 August 2016. This breach, or those breaches, were said to be a repudiation of the “First Agreement” or the “Second Agreement”, or alternatively, in or about late August 2016, Major “abandoned site” in breach of the two agreements or the Agreed Conditions. Such abandonment was said to constitute a repudiation of one, two or all of those agreements.
27 Alternatively, according to the Statement of Claim failure to provide labour services on site for a period of about 3 weeks meant that Acrow was in breach of contract to Hacer under its Head Contract. This constituted a repudiatory breach by Major under the First Agreement, the Agreed Conditions or the Second Agreement. The Statement of Claim described this as the “Labour Services Repudiation”.
28 On 23 August 2016, Mr Fisher of Acrow was said to have told Mr Walker of Major that Acrow could not continue with Major on site and was terminating the agreement. This was said to have taken place at Acrow’s premises in Clayton which had the effect, it was said, of terminating the First Agreement, the Second Agreement and the Agreed Conditions. A termination letter from Acrow’s solicitor dated 25 August 2016 had been provided to Major. As a result, the contract or contracts existing between the parties came to an end “on or about 23 August 2016”. Additionally to any of these entitltements to terminate Acrow was entitled to terminate on the basis of the Labour Services Repudiation.
29 As a result of that termination, or those terminations, Acrow was required to source alternative labour to complete the scaffolding work expending $256,718, which was said to be a reasonable sum for the outstanding work under the relevant agreement. That amount was claimed as loss and damage suffered by Acrow. Alternatively, it claimed “equitable compensation and/or damages in lieu of specific performance under s38 of the Supreme Court Act 1986” in the same sum of money.
30 In its prayer for relief, Acrow sought $256,718, or alternatively, damages or damages pursuant to s33 and s38 of the Supreme Court Act 1986 or equitable compensation.
Defence
31 In its Defence to the Further Amended Statement of Claim Major admitted entering into what Acrow described as the First Agreement “in respect of a Project at Tower Hill Road, Frankston”. That work was executed and, according to Major, the First Agreement “was not intended by the parties to apply to the Doncaster project”. Noting that Major had not executed the Second Agreement, neither the First Agreement nor the Second Agreement applied to Major’s work on the Doncaster project. The First Agreement, not being “tied to any particular project” and lacking “any provision for payment or price”, was alternatively void for uncertainty or not supported by valuable consideration.
32 Major admitted that it signed the document described as the `Hacer Scope’ as a tenderer as alleged by Acrow, but that at that time there was no contract between Hacer and Acrow, and the Hacer Scope therefore could not apply to any alleged contract because Acrow had not been engaged by Hacer “until about 15 January 2016”. It said further that, at some time after November 2015 in a conversation between Mr Ian Walker of Major and Mr Uri Pech and/or Jeff Stewart of Acrow. Mr Walker said he would not sign the Hacer Scope nor any agreement with liquidated damages. When Acrow and Hacer executed a “Head Contract” between themselves, the Hacer Scope became a document “intended to regulate the relations between Acrow and Hacer and its terms and conditions did not form part of any agreement there may have been between Major and Acrow”.
33 Major agreed that it was invited to quote for the work on the Doncaster project and provided quotations. As to the alleged “Agreed Conditions”, it said that Acrow’s:
“relations with Hacer bore the hallmarks of agency and … [Major] did invoice Hacer, have variations approved by Hacer, accept directions and instructions on site at Doncaster from Hacer and acted on a conviction that it had an agreement directly with Hacer”. Major agreed that Hacer would and did approve variations, but denied “ever being requested to supply [Acrow] with a copy thereof or receiving any such request”.
34 Major admitted that in late February 2016, Mr Walker, on its behalf, said, “I will not sign any agreement with a liquidated damages clause in it”. It said, “never at any stage was it requested to execute a varied form of the unexecuted or Second Agreement”. It said it was never requested “to sign any such agreement beyond the … First Agreement”. It denied agreeing to the conditions as alleged. Major denied allegations of “part performance” or that it was in any way bound by the “Second Agreement”. As to variations, Major said that it was not under any obligation to inform Acrow of those variations. Major agreed that it had completed the scaffolding, but said there were variations beyond the scope of its quotations and drawings yet to be completed, and that it did dismantle the lift shaft scaffolding.
35 Major admitted that its workers were stood down by the shop steward, an employee of Hacer, for a period of two or three weeks. It said that it performed works on site at the request of Hacer on several occasions, as recorded in its day labour or variation documents. Major denied that it caused the alleged stoppage to be indefinite. It denied that cash or cheque payments by Major “caused or contributed to the alleged indefinite stoppage”. It said Major took all reasonable steps to rectify and remedy every issue “and immediately ceased the cash and/or cheque payments” and placed all contractors and/or workers and/or employees onto wages forthwith. Any stoppage, said Major, was caused or contributed to by Acrow’s decision to engage alternative contractors “on or before 12 August 2016”. Acrow’s communication with the Union on or after that date where it said “it wanted to engage alternative contractors and sought the union’s assistance in engaging alternative contractors” caused and/or contributed to any stoppage or the duration of any such stoppage by its actions”. Alternatively, it was said that the stoppage was “probably caused by some other issue or issues concerning [Acrow] and/or the union and/or the engagement of alternative contractors beyond [Major’s] control”.
36 Major denied any repudiation of contract, or that any valid notice of default or termination had been served with respect to either the First Agreement or the Second Agreement. It denied that it abandoned the site and said it left at the request of Acrow. Any alleged oral termination which they had been purportedly given was, according to Major, “inconsistent with and contradictory to both the terms of the … First Agreement” and the Second Agreement. It referred to paragraph 24 of its Amended Defence. No notice of default or opportunity to rectify any such default was provided. It denied that the solicitor’s letter of 25 August was an effective termination of any agreement. Major agreed that the written termination in the solicitor’s letter terminated the First Agreement, but said that it made no “explicit or implicit reference to” the Second Agreement. Major said that $92,303.75 inclusive of GST was owing to it. As to Acrow’s outlay, Major said it could not admit the work was done as alleged. It denied that Acrow had suffered loss and damage and denied that Acrow was entitled to the relief which it sought.
37 Major denied that it had failed to provide agreed labour services and said that, at all material times, it had workers ready, willing and able to work on site as agreed and who did in fact work on site. If there were any actions on Major’s part that caused the industrial action, it had been remedied and rectified by Major when it was made aware of it, placing workers on wages. It denied that it contributed to any stoppage.
38 Major said it had not caused Acrow to breach its obligations to Hacer, and the stoppage was caused by Acrow’s decision to use alternative contractors, engaging these alternative contractors “waived [Major’s] obligation to complete the work and elected to proceed with other contractors, thereby excusing [Major] from any other obligation to complete the work”.
39 Major said that employee entitlement matters between it and its workers “did not constitute a repudiation” of any agreement to provide scaffolding labour. It said that the oral or written termination notices were not effective. The alleged oral termination could not be effective. First because, according to Major, it denied the alleged phone call from Mr Miller and, in any event, clause 26.1 of the First Agreement required a notice or demand to be in writing. Further, it relied on confirmation of the “invalid and unlawful oral termination notice” by referral to a “verbal termination notice”.
40 Further, it said the notice did not identify “with any clarity or particularity” for the breach relied upon, failed to identify any fundamental matter, and purporting to be a notice of default failed to provide Major with any opportunity to rectify any alleged default. It said it “wrongly identifies cash payments as a breach of Cl 5.1 which matter is not fundamental to the provision of scaffolding services”. It also wrongly identified cash payments at a time when “this issue had already been rectified by [Major]”.
41 The letter was said to fail to “properly identify” which employee entitlements, if any, Major had failed to pay. It was too vague and unclear. The clause relied on the First Agreement which did not give Acrow “a right of termination” but offered it a potential indemnity. It alleged that proper provision or adequate provision “may not” have been made rather than alleging an actual breach, falsely assumed that “because cash or cheque payments were made by the defendant that entitlements were not paid”. It was primarily a notice that Acrow had already appointed another contractor. The notice did not allege that Major had caused the Union stoppage and did not identify any ground or grounds on which Acrow now seeks to rely in its Statement of Claim.
Major’s claim
42 Major had brought a claim in the Magistrates’ Court seeking recovery of $36,465 as a debt or liquidated sum as against two defendants, namely Acrow and Hacer in proceeding H11320924. It brought its claim under an agreement said to have been made “in or about October 2015” between it and Acrow or, alternatively, Hacer. This agreement was said to be “partly written, partly oral and partly to be implied”. The written portion was said to be constituted by the Hacer Scope, a quotation by Major, and various tax invoices. The oral portion was said to be constituted by conversations between Ian Walker of Major and “various representatives of [Acrow and Hacer] regarding work at Elgar Court, Doncaster”. The amount claimed was said to be the total of some 14 unpaid invoices.
43 I have been informed that Hacer paid the amount claimed into court to abide the outcome of this proceeding.
Which contract with whom?
44 Acrow pleaded its claim based on a multiple set of alleged contracts, one under the “First Agreement”, the second under the “Agreed Conditions” and the third under the “Second Agreement”. Mr Walker gave evidence that he declined to sign the Second Agreement because, in his view, it was inappropriate as Major was entering into a contract directly with Hacer, rather than with Acrow. In closing submissions, Mr Rowland on behalf of Major said:
“Despite Walker’s genuine belief that he had contracted directly with Hacer, it is conceded that this could not be so. There is no evidence that Hacer agreed to such an arrangement and Mr Fox’s evidence was to the contrary.” (paragraph 18)
Mr Rowland proceeded to mention a series of matters which rendered Mr Walker’s belief “not without support”. In mentioning those matters, I did not take Mr Rowland to be withdrawing the concession made and quoted above. In those circumstances, the significance to be attached to these other matters is not clear. The most significant of the matters mentioned was that Hacer processed Major’s invoices. The explanation for these matters, which does not entail any conclusion that Hacer, rather than Acrow, was Major’s counterparty, is to be found at paragraphs [3]-[6] above. As Mr Rowland’s concession observed, there is nothing to suggest that Hacer intended to contract directly with Major. According to Mr Stewart of Acrow, any such proposal was “knocked on the head” by Mr Fox of Hacer. (T323, L15-17, 25‑31, T377, L1-13) Mr Stewart conceded, however, that Mr Walker was not present during the exchange which he described. This fact is consistent with Hacer’s sole counterparty being Acrow and not Major. For these reasons, and also on the basis of the concession quoted above, I will proceed on the basis that Major’s contract was with Acrow and not with Hacer.
45 As to the application of the terms of the First Agreement, as observed above, they were generic and, by their terms, capable of applying to the work done by Major at the Doncaster site. Mr Rowland submitted that “Acrow itself seemed to have an expectation that the [First Agreement] did not apply [to the work at Doncaster]”. (Closing submissions, paragraph 20) This must be correct, at least initially, otherwise, why would Acrow have submitted the Second Agreement for execution by Major? The correctness of the assertion is less obvious when Mr Walker, having declined to execute, matters proceeded without the Second Agreement having been adopted by Major.
46 Mr Rowland noted the uncontested fact that Major refused to execute the Second Agreement. He said, nevertheless, that it must be inferred that the parties proceeded on the basis of some contract. He referred to Heydon on Contract (2019) p108-9. He concluded therefore that:
“Major and Acrow entered into a fresh implied agreement for the provision of labour services whereby on a day to day basis it dealt with Hacer directly. This analysis is consistent with Walker’s belief, evidence and Acrow’s own correspondence with Hacer. (CB 446)”
According to Mr Rowland, this should be regarded as an instance of the “third limb” of Masters v Cameron (1954) 91 CLR 353. I had some difficulty with this observation. Mr Rowland’s primary contention seemed to be that, whichever way it went, there was a contract of some sort between the parties. This was consistent with the passage he cited and relied on from the former Justice Heydon’s book on contract. Category 3, Masters v Cameron is apt to describe situations where preliminary understandings have failed to yield any enforceable contract because of the parties’ contemplation that no enforceable contract should arise until a formal document be executed. Ultimately, I understood Mr Rowland’s contention to be that there was an implied or oral contract between Major and Acrow or, as a fall-back position, if any written agreement was enforced between them governing the work on the Doncaster project, it was the First Agreement. (T586, L28-T587, L2)
47 Mr Silver contended that since a purely oral contract for work of this type would be regarded as an “entire” contract, such that there would be no entitlement to make progress payment claims, the making of the progress claims by Major necessarily entailed a concession that one of the written sets of contract terms alleged in the Statement of Claim governed the parties’ relationship. He referred to Hoenig v Isaacs [1952] 2 All ER 176 and H Dakin & Co Ltd v Lee [1916] 1 KB 566. I did not understand Mr Silver to contend that it would be incompetent for an oral agreement to be made which included an express term permitting progress claims in circumstances such as the present, or that such a term might be implied either on the basis of custom in the building trade or by way of a term implied to give business efficacy to the agreement in light of the fact that progress payment claims are so common now in the building industry and are the subject of specific legislation. In the end, it is unnecessary for me to pursue this matter. The most plausible interpretation of the events which occurred is that —
(a)the First Agreement was apt by its generic terms and its expression as governing work done by Major for Acrow within the relevant time frame;
(b)not initially intended by Acrow to govern work on the Doncaster site, with Acrow propounding a separate and special agreement for that purpose; but
(c)with the rejection of the Second Agreement by Major apt to govern the situation as a fall-back, this might be thought to be consistent with Mr Walker’s having executed the First Agreement in its generality on behalf of Major and having rejected the Second Agreement because of its inclusion of liquidated damages proceedings.
I should record I am sceptical that any belief on Mr Walker’s part that Major was dealing directly with Hacer had anything to do with his refusal to sign the Second Agreement on behalf of Major. Whilst Mr Walker displayed an almost religious aversion to liquidated damages clauses, he seemed otherwise to be little concerned with legal technicalities. Asked about his signature on the First Agreement, he replied, “To be totally honest I never read it.” (T148, L4‑5) He said, “I signed it in good faith, thought it was an agreement for Frankston, that’s it.” (Ibid, L17-19) It seems difficult to credit that a man with this attitude to legal documents would have declined to execute an agreement on the basis of the identity of the counterparty. There was nothing in Mr Walker’s evidence to suggest that he was unwilling to deal with Acrow or that he regarded Hacer as “a better credit”. It seems realistic to think that he was concerned only to ensure that the proper price was shown in any agreement which he might sign on behalf of Major and that the agreement include no such “poison pill” as a liquidated damages clause. In the result, therefore, I conclude that, with Mr Walker’s refusal to execute the Second Agreement, the matter fell back under the terms of the First Agreement.
Repudiation
48 The fundamental point at issue between Major and Acrow is the allegation of repudiation made by Acrow as against Major. Unsurprisingly, Major, for its part, alleges that it is Acrow’s conduct which is repudiatory.
49 This dispute, and the proceedings which have emerged from it have been bedevilled by the careless use of language and a failure to “think through” what the essence of the dispute might be and how it could be related to any written agreements governing relations between the parties. Even to the very end of a lengthy trial with an adjournment after the close of evidence to enable counsel to marshal their closing submissions, inexact terminology persists.
50 Assuming that either what the Statement of Claim describes as the “First Agreement” or the unexecuted “Second Agreement” or obligations in similar terms to the words in those documents, existed between the parties, it was unsurprising perhaps that when Acrow had its solicitors write a letter of “termination”, the solicitors sought to relate it to the language of the written agreement or agreements. From their point of view, it was inconvenient that what, according to Acrow’s case, caused the industrial stoppage which, according to Acrow’s case, led it to terminate its contract with Major, was not embodied in the written contract terms.
51 There were inaccurate allegations of failure to make provisions for employee entitlements such as superannuation, training levies, redundancy payments and so forth. Yet, Mr Walker’s unchallenged evidence at trial was that these payments were up to date. There was an allegation of a failure to meet payroll tax obligations, which was ultimately somewhat ambiguous and conceded by Mr Silver, counsel for Acrow, not to be of sufficient importance, even if proven, to justify termination of the contract.
52 Finally, the issue which was said to have led to the industrial “blow up” was said to be “cash payments”. Yet, upon analysis and examination, what the Union was complaining about was not “cash payments” as if a payment to a worker on site made by electronic transfer or by cheque would be proper, but if made in bank notes and coin would be improper. Rather, the complaint was that making payments without the withholding of the appropriate PAYG instalment was objectionable.
53 Assuming, as Acrow’s case did, that the contractual obligations between it and Major were found to be exhaustively within the four corners of the “First Agreement”, the “Second Agreement” or the “Agreed Conditions” – all of which were materially the same – none of them dealt with the issue of payment of amounts of assessable income without holding PAYG tax instalments.
54 Unsurprisingly, a notice of termination that is based upon the view that somehow this matter, not dealt within the four corners of the contract, can somehow be “shoehorned” in by reference to employee entitlements or payroll tax must be ineffective.
55 Clause 24.1 of the “First Agreement” (CB 90) provides for Acrow, in the case of default, to give a written notice of default, specifying a breach and a date by which Major must rectify the breach. A clause such as this is inherently inappropriate to launch a cancellation:
(a) by word of mouth – assuming, despite Mr Walker’s denial that the oral termination took place, which
(b) takes effect immediately without any opportunity to rectify it.
56 It is also ineffective as a basis for a substitute or supplementary written demand from solicitors which assumes the effectiveness of the “forthwith” oral cancellation and fails adequately to identify the actual “casus belli”, but rather making the allegation that Major had been “paying cash to your employees” and not complying with clause 5.1(v) of the relevant agreement, which does not deal with the PAYG tax issue referred to above at all.
57 Unsurprisingly, in his closing submissions, Mr Silver did not seek to uphold these “terminations” as effective terminations of any written contract between the parties. He relied upon them solely as constituting elections on the part of Acrow to accept a repudiation of the contract by Major.
58 Again, allegations of Major having abandoned the site and so forth cannot be upheld in light of the factual narrative contained above.
59 Mr Silver’s primary contention was that the events that had occurred constituted proven or declared inability on the part of Major to perform its contractual obligation which Acrow could, as a matter of law, treat as amounting to repudiation, which it accepted by its communications of 23 and 25 August 2016, thereby terminating its contract with Major.
60 Mr Silver relied upon a formulation in Halsbury’s Laws of Australia [110-9335], where the learned authors state:
“Where a promisor breaches the contract, in circumstances which would suggest to the reasonable person in the promisee’s position that the promisor will be unable to perform in the future, and the promisee draws that inference, the promisee will be permitted to terminate the performance of the contract for repudiation. However, it must be established that the reasonable commercial person would have drawn the inference of inability which the promisee claims to have drawn. The requirement of seriousness must also be satisfied, that is, the promisor’s apparent inability to perform must amount to an actual future breach of sufficient seriousness to give rise to a right to terminate the performance of the contract.”
61 On behalf of Major, Mr Rowland did not disagree with this as an accurate statement of the law. It is notable that, as formulated, the principle applies not only to actual but also to future breaches of contract. Mr Walker’s view was that even with a lengthy “stand down” as at the time of Acrow’s termination, Major was not behind schedule in performing its duties in supplying labour for the scaffolding element of the work.
62 In my view, the criterion of seriousness is well and truly satisfied here in circumstances where work on the scaffolding had substantially stopped for a period of weeks. Despite remonstrance and entreaties and a change of Major’s conduct ensuring future deductions of PAYG instalments, the union controlling the site, the CFMEU, made no concession or indication that the “stand down” would be terminated at any particular time in the future or ever.
63 Following the initial trouble on site, Mr Walker says he contacted the State President of the Union by telephone. (T79, L25-28) Mr Walker said that he placed material before Mr Edwards at a meeting which he subsequently had with him indicating that all employee entitlements were up to date. What the Union was demanding was that the workers were to be “put on wages” with PAYG instalments withheld. (T83, L15-25) This was done.
64 Nevertheless, the stand down continued. Mr Walker regarded this as a determination by Mr Edwards “as a form of punishment, shall we say”. The workers were on full pay for the period of the stand down. (T84, L6-9)
65 Mr Walker sought an arrangement with Mr Edwards that the stand down should be terminated upon proof that his company was complying with the requirements as to PAYG instalments. Mr Edwards had said, “we’ll think about it”, but never got back to Mr Walker with a positive response. (T87, L9-22)
66 In those circumstances, a reasonable person could infer, and I conclude Acrow did reasonably infer, that Major’s ability to perform on the Elgar Court site was blocked for the indefinite future.
67 Major’s case on this point is that the industrial stoppage could be seen as caused by factors other than the payment practices of Major, such as the engagement of other contractors by Acrow during the stand down and a grievance by the Union against Acrow because of redundancies which it imposed arising out of its moving its premises around the same time as the events under discussion.
68 Mr Stewart, in his affidavit, says:
“Hacer engaged their own labour subcontractor (Central Scaffolds) to complete some rectification work that needed to be urgently done as a result of Major having erected scaffolds too close to the walls.” (CB 498 [22])
69 The day labour dockets for this work appear at CB 486-498. In accordance with the description on Mr Stewart’s affidavit (CB 536, [22]), the billing was to Hacer rather than to Acrow. Given that these workers were on site, there is no evidence that the CFMEU took any objection to their working or prolonged Major’s stand down in any way based upon the presence of the Central Scaffolds workers. I have already quoted Mr Walker’s account of his interview with Mr Ralph Edwards of the CFMEU. Major’s contention on this point fails simply for lack of evidence.
70 Nor can I find any factual basis for a contention, which I understood Mr Rowland to make, that Mr Fisher’s discussions with the Union about identifying alternative contractors to complete the scaffolding labour tasks was causative of the original stand down or prolonged it. What causal connection there might be between the two was not explained. I assume that it was contended that the Union was somehow “emboldened” to maintain its ban on Major as regards this site, by the possibility of an alternative contractor being engaged. There was nothing said or done by the Union that emerged in evidence which would give colour to this interpretation of events. On the contrary, the flavour of the evidence of everyone who spoke of the industrial ban seemed to be that what the Union did had an even greater force than the force of law. It was like a force of nature. No-one suggested, for instance, that it would be practicable to try and defy the Union in some way. In those circumstances, the suggestion that it would be reasonable to conclude that the Union needed to be “emboldened” in some way to act in support of what plainly it regarded as an important industrial principle, is unconvincing. Again, this factual contention urged on behalf of Major fails for lack of any evidence.
71 Finally, it was contended on behalf of Major that the industrial action was not, in truth, caused by Major’s payment policies on site but, in fact, arose from a dispute over redundancies relative to Acrow’s relocation of its principal office in Victoria. Evidence elicited in cross-examination established that such an industrial issue had arisen about the same time as between Acrow and the CFMEU. To suggest, however, that this was the cause of the stand down of Major’s workers, again fails for lack of evidence. If this were a significant causal factor, one would have supposed that the Union State President would have told Mr Walker at their interview, “How about obtaining a satisfactory answer from Acrow on this redundancy issue?” This played no part in Mr Walker’s account of the interview, nor in any of his dealings with the CFMEU. It is, therefore, speculative, and contrary to the probabilities that this was a causal factor in the imposition of bans on Major.
72 A finding of repudiation by virtue of the putative repudiating party’s inability to perform requires clear and compelling evidence. Professor Carter, in his work Carter on Contract, includes, in a highlighted box under the heading “Practice point” the statement: “If it is proposed to rely on the factual inability of a promisor to perform as a justification for termination by the promisee, it should be borne in mind that the evidentiary burden is extremely difficult to discharge”. (Carter on Contract – [35 –220] 88,322 Service 28)
73 In the body of his analysis, Professor Carter states:
“Factual inability is very difficult to prove, which has led to suggestion that the phrase ‘wholly and finally disabled’ is too demanding a test of incapacity to accord with reasonable commercial practice, but it is indicative of the range which the test of substantiality connotes”. (Ibid)
74 In his formulation of the principle relied upon by Mr Silver on behalf of Acrow, the Professor says that the proof required of the aggrieved party to establish repudiation based on practical inability to perform is “that the promisor was “wholly and finally disabled” from performing the contract. The principal and key authority and support of this view is the decision of Devlin J (as he then was) in Universal Cargo Carriers Corp v Citati ([1957] 2 QB 401). In Sunbird Plaza Pty Ltd v Maloney (1988) 166 CLR 245, the High Court considered a complex set of facts arising out of an aborted contract of sale for a home unit in a Gold Coast unit development. One of the matters which the Court was required to consider was whether a failure by the vendor to procure, by the nominated settlement date (where time was stated to be of the essence), registration of amendment to the bylaws of the relevant development, could be treated by the purchaser and by extension, the purchaser’s guarantors, as a repudiatory breach based upon the vendor’s inability to perform a material obligation. Mason CJ, with whom Deane, Dawson and Toohey JJ concurred, said:
“Anticipatory breach may occur by reason of repudiation or renunciation of contractual obligations or by reason of inability to perform them. Here the respondents argue that the appellant was unable to procure registration of the amended by-laws on or before 25 June and that this inability amounts to an anticipatory breach. But, as we have already seen, the obligation to amend the by-laws under cl 4 was to be performed ‘prior to settlement’, not before the date fixed for settlement by the contract. The existence of an anticipatory breach for inability to perform is accordingly to be determined at settlement, whenever that takes place, not at the date fixed for settlement. The purchaser, by terminating the contract on 25 June on an unsustainable ground and not attending on settlement on that day, effectively ensured that 25 June was not the day of settlement, thereby bringing about a situation in which the appellant had more time in which to perform its obligation to secure registration of the altered by-laws. By its own act in refusing to attend on settlement the purchaser deprived itself of the right to terminate for breach of cl 4.” ((1988) 166 CLR 245, 263-4)
75 His Honour’s statement of the law raises no direct analogy with the facts here, but is indicative of the strictness of proof necessary for a finding of final disablement to be made against Major. For the reasons already given, despite the strictness of proof required, in my opinion, the necessary factual finding of practical inability or final disablement should be made. As explained above, the Union’s edicts were treated by all parties as effectively irresistible. Mr Walker, on behalf of Major, had taken every step available to him by way of rectifying or, at any rate, altering his company’s payment mode for the future that was available to him. He proved unsuccessful in attempting to have the industrial ban lifted and, in the circumstances, I think it reasonable to infer that the ban was to remain in force indefinitely. One might consider that placing Major in the embarrassing contractual position in which it finds itself now, was regarded by the Union as appropriate punishment.
76 On behalf of Major, Mr Rowland said of the solicitor’s letter described as “Default Notice”, that it was “hopelessly unclear except in its equivocality”. He said that it failed to comply with clauses 24 and 26 of the First Agreement “upon which Acrow places such heavy reliance”. He referred, in this respect, to the cross-reference to the “verbal termination notice”, the statement that the contract had already been terminated, the requirement to show cause within 24 hours, and the statement that another contractor had been appointed to complete the Agreement and a reference to the reservation of rights. I accept Mr Rowland’s critique of this written notice as an invocation of any express power in the terms of the First Agreement, or what the Statement of Claim describes as “the Agreed Conditions” or the unexecuted “Second Agreement”. Nevertheless, the correspondence was unequivocally a statement of termination, either forthwith, 48 hours previously or 24 hours into the future and, as such, sufficient to constitute an election to accept the repudiation constituted by Major’s practical inability further to perform its obligations under the relevant contract, whatever document or set of oral discussion constituted that contract.
77 Mr Rowland referred to the statement, “Repudiation of a contract is a serious matter and is not to be likely found or inferred” in Ross T Smyth & Co Ltd v T D Bailey, Son & Co ([1940] 3 All ER 60, 71) and to the requirement that all circumstances need to be considered, referring to Mersey Steel & Iron Co Ltd v Naylor, Benzon & Co (1884) 9 App at Cas 434, 439; Shevill v Builders Licensing Board (1982) 149 CLR 620, 633 per Wilson J). He said, “Repudiation requires a clear indication of the absence of readiness and willingness to perform the contract”. The statements of authority are doubtless correct. The findings that I have made and the evidence which was adduced as to the industrial situation on site in August/September, indicates a lack of “readiness” on Major’s part further to perform its obligations under the relevant contract based on inability rather than a lack of willingness. Mr Rowland correctly stated that the test for these matters is objective, referring to the decision of the High Court of Australia in Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd ((2007) 233 CLR 115). The analysis that I have made leads me to the conclusion that on the basis of objective considerations, Major should be regarded as having been shown to be finally disabled from further performance of its contractual obligation. With its workers stood down, it was unable to render any further labour on the scaffolding element of the project. The breach was not merely a matter of a contravention of a particular clause of a written agreement, rather, it was a wholesale blockage on any further performance by Major. It, therefore, went to “the root of the contract”. It is difficult to conceive of a more fundamental breach than the one which occurred here, except a refusal or inability to even commence performance.
78 Mr Rowland said, “Alternatively, the notice [viz, the solicitor’s letter of 25 August] could be seen as a written waiver of Acrow’s rights to insist upon Major’s performance. It could equally be read as a letter excusing Major from further carrying out any obligations to Acrow. In the circumstances Major cannot have repudiated the agreement”. For reasons already explained in my view, this letter can be treated, and should be treated, as an acceptance of Major’s repudiation arising out of Major’s inability further to perform its obligation.
79 Finally, Mr Rowland observed that there was no pleaded or proven clause in the contract requiring maintenance of “industrial harmony”. So much may be accepted, but this is no answer to a finding of practical inability or final disablement from ability to perform as a basis for a finding of repudiation.
Quantum of damages
80 Mr Rowland contended that the damages sought by Acrow were excessive. He referred to and relied on an expert report from Mr Peter Clack saying, “the work was undertaken on an objectively quantifiable area of scaffolding, by workers on an hourly rate”. This was the same hourly rate that Major charged on a day labour basis throughout the project. The reasonable time to take down the scaffold was also therefore objectively quantifiable. He referred to T285 and T288 and Mr Clack’s report at CB 862-863. He referred to a passage at [32] in the judgment of Garde J in Webb v Spectre Group Pty Ltd [2018] VSC 704. He said unless the criterion of reasonableness as adopted by Mr Clack were applied, “Acrow could hypothetically have engaged contractors to complete the works (of dismantling 11 floors of scaffolding including variations) at any cost. This would be neither reasonable nor allowable.” (Closing submissions paragraphs 70-72) He noted that Mr Clack’s evidence was uncontradicted by any other expert, nor was any evidence called from any representative of Nomad Scaffolding or Scaffold iT. He concluded, “the labour and methodology involved in dismantling by the alternative contractors is unknown.” (Ibid, paragraph 73)
81 Mr Clack provided two expert reports, the first dated 11 June 2019 (CB 702) and the second dated 25 October 2019 (CB 856) In his second report, he concluded, based on a detailed analysis of the invoices rendered by Scaffold iT and Nomad, whom he described as “the Alternative Contractors”:
“I consider the hours claimed (and associated costs) by the Alternative Contractors is excessive and unreasonable. My assessment of the fair value of the remaining contracted works completed post August 2016 is as per the original contract amount of $90,300 excluding GST.” (CB 863)
I refer to the steps taken by Mr Pech of Acrow in retaining Nomad and Scaffold iT at [19] above. As to the $90,000 approximately “undrawn” from Major’s contract price for labour, Mr Pech said none of the alternative contractors gave any credence to that figure. (T502, L1-11) Mr Pech’s evidence as to the matters referred to in [19] was effectively unchallenged. It was not put to him, for instance, that there existed one or more alternative providers of labour for scaffolding dismantlement who might have been approached and who might have provided a less expensive service than was, in fact, ultimately contracted.
82 In Webb v Spectre Group Pty Ltd [2018] VSC 704, relied on by Mr Rowland, Garde J was considering an appeal from a determination by a senior member of the Victorian Civil and Administrative Tribunal in a domestic building dispute. Following a nine day hearing, the Tribunal member had determined the case in favour of the owner and against the builder. The matter, which was under appeal, was his quantification of the damages to be awarded against the builder. The member adopted the figures advanced as the “fair and reasonable” cost of repair by expert witnesses, rather than the actual outlays undertaken by the appellant owner. His Honour noted that at the hearing in the Tribunal, “there was no claim or defence that the completion cost was unreasonable or excessive, or that there had been a failure to mitigate.” [32] His Honour remarked, “It is not obvious why the Tribunal relied on conflicting expert estimates when actual completion costs were available” (Ibid). Garde J found that the Tribunal had “erred on a question of law when it failed to disclose a path of reasoning as to why the actual cost of completion should not be adopted in this case as the best method of assessment of damages for completion” (Ibid, [45]). Mr Rowland correctly observed that in the present case, there was a pleaded assertion by Major that the damages claimed by Acrow of the actual cost of completion of the work which Major had contracted to do were excessive.
83 Acceptance of Mr Pech’s unchallenged evidence, together with Mr Rowland’s reliance on Mr Clack’s opinion, would create a paradox. Upon the findings that I have made, Acrow is entitled to be put back in the same position as it would have been had Major completed its contract to the extent that damages can achieve this result. Yet on Mr Rowland’s contention, absent any evidence that Acrow could have hired labour more cheaply to complete the work, and despite a failure to challenge Mr Pech’s evidence that Acrow had done its best, Acrow’s damages should be restricted to an amount which leaves it out of pocket in a six figure amount.
84 It was not contested that the proper measure of damages, assuming that Acrow’s contention of repudiation were upheld, was the cost of completing the contract work. Mr Clack conceded that the urgency existing where a contractor needs to be replaced can lead to incoming contractors taking advantage of the proprietor’s difficult situation and adding a premium to the price. (T271, L21-T272, L3) Mr Rowland observed, correctly, that the charges levied by the Alternative Contractor were hourly rates, which were the same hourly rates charged by Major for variations, and so no such premium was obviously included in the charges made by the Alternative Contractor. Even in those circumstances, as Mr Clack was prepared to concede, the premium could be included by “loading” the hours. (T302) In the end, it is unnecessary, and perhaps inappropriate, to speculate on these matters. Mr Pech’s evidence was that the outlays made were the best deal that Acrow was, in the circumstances, able to do. In my view, therefore, the amount claimed by Acrow is the proper measure of its damages, a result which seems to be in accordance with the outcome which Garde J implied might have been more appropriate than the one reached initially, based on the expert evidence in Webb’s case. In contrast to Webb’s case, the actual outlays were subject to a pleaded challenge, but Mr Pech’s evidence as to how he came to make the actual outlays was not the subject of any effective challenge in cross-examination.
Variations
85 Mr Silver, in closing address, noted:
“Major contends a number of its payment claims, in the sum of $31,740.75 (of which $20,423.75 has been paid and $11,317.00 is outstanding) were variations, which should not be counted as reductions of the total contract sum.” (Closing submissions, paragraph 25)
According to Mr Silver, acceptance of Acrow’s contention that Major repudiated the agreement and Acrow accepted that termination required that issue to be determined “so as to work out the balance of the contract works at termination”. (Ibid, paragraph 26)
86 Acrow’s contention was that each of those payments “must be deducted from the agreed sum”. (Ibid, paragraph 28)
87 Mr Silver’s primary contention that these claims should not be accepted as “variations” was a lack of evidence. The evidence relied on by Major, he said, did not “identify how the works are not in the original scope”. (Ibid, paragraph 31) Mr Silver also noted that Acrow’s witnesses were not cross-examined on the point.
88 Mr Rowland’s contention was that since many of these claims had been paid by Hacer, there was a course of dealing which entailed acceptance of liability by Hacer as the paying authority on behalf of Acrow. (T570-2) Mr Silver said the issue was not whether there was, in fact, liability for the amounts paid or the amounts remaining unpaid and claimed as variations, but whether Acrow should be liable for them as variations rather than simply as part of the contract price. (T571,L26 - T572,L2) Mr Rowland referred to Acrow’s quotation to Hacer dated 21 March 2016, which stated under the heading “Labour”:
“The Acrow Day Labour/Variation to Work Book must be signed as your commitment to pay extra to this contract sum at the rates as listed for any day works, variations to the original scope of works, or alterations to the scaffold during erection or after the initial handover. These rates may change in the future due to industry cost movements. Any alteration to The Acrow Day Labour/Variation to Work Book hours must be initialled and dated by an Acrow representative as approved and agreed to at the time of any such alteration – if not the original hours will prevail and remain chargeable.” (CB 440, CB 743-769)
Whilst the individual writing on particular forms may be difficult to read, as I understand the effect of the evidence of Mr Walker at T217-8, each of them was signed by a Hacer representative on site, Mr Walker, Mr Fox or perhaps Mr Gudgeon. There was some dispute about the ticking of boxes. The arrangement made between the parties was that Hacer was to be responsible for paying Major. This was at least in part a measure to save administrative costs for Acrow. The evidence showed that there was minimal Acrow presence on site. In those circumstances, it would seem that as between Major and Acrow, Hacer had been clothed by virtue of the agreement between Hacer and Acrow with authority to “sign off” on variations. As to the ticking of boxes, I was not taken to any provision in the First Agreement which specifically dealt with this matter. In the circumstances, therefore, each of these items should be regarded as a variation and not an amount to be deducted from the contract sum.
Disposition
89 I will invite the parties to bring in short minutes to give effect to these reasons.
Costs
90 I have heard no submissions on the question of costs and so I will reserve them.
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